viernes, 13 de febrero de 2015

viernes, febrero 13, 2015

Inside Business

February 9, 2015 3:15 pm

Swiss mess: another legacy issue for HSBC to clean up

Patrick Jenkins
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Lord Green faces 'important questions'
 
 
So who was responsible for the Swiss mess at HSBC?
 
It has long been known that the British group’s Swiss private banking arm was being probed over allegations that it helped clients from several countries engage in aggressive tax avoidance and possibly tax evasion.
 
Now a vast haul of data — uncovered by an investigative journalism project involving the BBC and The Guardian among many others — has revealed the extent of alleged wrongdoing at the Swiss operation.

These are historic allegations, dating from 2005-2007. And while HSBC accepts responsibility for its misdemeanours, it stresses it has changed its ways. Since taking over as chief executive in 2011, Stuart Gulliver has set about reforming the group’s lax culture and cleaning up earlier misdeeds.
 
But whose misdeeds were they in the first place? Margaret Hodge, the Labour MP who chairs the UK’s parliamentary public accounts committee — and has an interest in anything that has short-changed the tax authorities — has been quick to point the finger. Lord (Stephen) Green, the former Tory trade minister and head of HSBC before that — was either “asleep at the wheel” or “involved in dodgy tax practices,” she said. “Either way, he has got really important questions to answer.”
 
Indeed he does. Not only did he fail to catch such gross wrongdoing while serving as chief executive from 2003 to 2006 and then chairman until 2010. He can also be criticised for double standards in preaching about morality in banking — including publishing a book, Good Value: Reflections on Money, Morality and an Uncertain World — while dubious practices had been going on under his nose. It is disturbing, too, that HSBC’s supposedly executive chairman found time to write and publish a book in 2009, while heading one of the world’s biggest banks as it struggled with the aftermath of the financial crisis.

But for all the brickbats that can be thrown at Lord Green for his shortcomings, it is Sir John Bond who has the more damning case to answer.

During his time as HSBC’s executive chairman, from 1998 to 2006, he spent close to $50bn buying up smaller banks around the world and building — but failing to control — a fast-enlarging HSBC empire.

Three of those deals have been financially and reputationally toxic for HSBC over the past eight years.

The first to backfire was the 2003 acquisition of Household, the US consumer finance business that cost HSBC billions of pounds more in defaulted subprime loans on top of the $14bn purchase price.
 
Next came the fallout from HSBC’s Mexican acquisition, dating back to 2002. By 2012, the bank had paid out $1.9bn in fines relating in large part to that unit’s role in facilitating the laundering of drug money.
 
The Swiss misadventure stems from the 1999 acquisition of Republic, a US bank with a substantial Swiss private banking operation.

In all three cases, as HSBC now acknowledges, the group’s old imperial ways failed. HSBC had long comprised a network of fiefdoms. When those operations were homegrown, it worked — sometimes inefficiently, but at least not disastrously. But Sir John’s attempts to shake up a sleepy HSBC with aggressive acquisitions created a far larger, similarly somnolent organisation whose top brass in London and Hong Kong were ignorant of the risks its newly acquired subsidiaries were really running.

Sir John is now 73. Having done a stint chairing mining group Xstrata, he is active these days only as a low-key non-executive at a handful of US organisations (Northern Trust, KKR).

For him, HSBC’s Swiss scandal is another sorry indictment of his tenure. For Mr Gulliver, who has spent the past four years getting to grips with — and shrinking — the bank’s empire, this is yet another old mess to clean up.

For HSBC, one dangerous anachronism remains. Although Mr Gulliver, as chief executive, is clearly in charge these days, there is still an executive chairman, albeit one who is now more narrowly focused on issues such as regulation. It is time HSBC had a boss who was properly accountable to a non-executive chairman and a strong board. Such a system might well have restrained Sir John’s exuberance. It would also mitigate the risk of history repeating itself in future.

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